How zakah is paid for dropshipping business
Fatwa No: 321031

  • Fatwa Date:3-4-2016 - Jumaadaa Al-Aakhir 25, 1437
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Question

Assalaamu alaykum. I am doing a dropshipping business for a year. About a year ago, my capital for doing such business was about $200. Overtime, my capital increased, and I used it to purchase some goods that were then delivered to the consumer and constitute a circulation cycle that continued until, finally, after a year, praise be to Allaah, I successfully collected about $4000. Nevertheless, I used it again and again for doing such dropshipping cycles to the point that I did not have any money in my savings sometimes. However, in such circulation cycle, there were a number of items that were still in the process of delivery to the consumer. If so, then how to calculate zakah on trade? Besides on trade, am I to be charged zakah on another kind of possessions? We hope for your answer regarding this. Wassalaam.

Answer

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger.

As for the zakah, you should wait for the elapse of a lunar year after you acquired the money liable for zakah and pay 2.5 % of the value of the trade goods in your possession and your other properties, if any. The trade goods that you already sold and which are no longer your property are not liable to zakah, and the fact that they are still in the process of delivery to the buyer is irrelevant in this regard.

As for the sale transactions that you conclude with your customers, you did not clarify it to us. However, if dropshipping means that you are marketing the product through your website or web page and when a customer wishes to buy it, you conduct a sale transaction with him in the form that you will provide him with the product with the requested specifications within a fixed time and he pays you the price of the product directly via a money transfer or deposits it in your bank account or the like, and then you buy the product with the required specifications and arrange with the company to ship it to the customer directly, then you should know that this falls under the category of the salam sale (i.e. a sale for an agreed price with immediate payment while delaying the receipt of the sold item to be delivered in the future on a fixed date). If this is the case, then there is no harm in that.

Also, if you only market the product and buy it on behalf of the customer acting as his agent and charge him a commission, or if you agree with the company on marketing and selling its products in return for a commission, then there is no problem with that as well.

The prohibited scenario is to market the product as if it is your property and in your possession and sell it to the customer before you actually buy it and take it into your possession and arrange with the company to ship it to the customer directly. This is prohibited because it is selling what you do not own, which is prohibited under Islamic law. We have previously underlined the prohibition of such a transaction in fatwa 276988.

Allaah knows best.

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